Why The Huge Disparity Between The "offshore" Rate And Normal Rate Of Us To Thb?

[steelepulse]

So I see on Bloomberg that the "offshore" rate is around 32, yet any other banking service has the rate in the mid 34's.  Why the huge difference and how can I get in on this?

 

[ProThaiExpat]

The offshore rate is a rate presumably more reflective of the true value of the Baht vs. the Dollar as a result of trading offshore.

Money that comes into Thailand and converted by banks in Thailand use the "onshore rate" which is affected by the Bank of Thailand efforts to "stabilize" money flows and their periodic intervention in the market.

Onshore rate is usually 3 baht weaker against the dollar and that is why most instruct the wiring institution to wire dollars rather than baht, otherwise the offshore rate prevails vs. the onshore rate which occurs when the dollars get here and are converted.

[steelepulse]

Thanks ProThaiExpat.  Nice concise summation.  I sure would like to get in on this 3 baht difference, but I'm sure it's not possible unless I happen to know someone and happen to have some deep pockets .

The offshore rate is a rate presumably more reflective of the true value of the Baht vs. the Dollar as a result of trading offshore.

Money that comes into Thailand and converted by banks in Thailand use the "onshore rate" which is affected by the Bank of Thailand efforts to "stabilize" money flows and their periodic intervention in the market.

Onshore rate is usually 3 baht weaker against the dollar and that is why most instruct the wiring institution to wire dollars rather than baht, otherwise the offshore rate prevails vs. the onshore rate which occurs when the dollars get here and are converted.

[calibanjr.]

You'd have to be able to "move" "cheap onshore" Baht offshore for conversion at higher rate. Doubt it's happening unless you got connections WAY up there. You gots to be "organized" to get substantial amounts of Baht out da country.

[Naam]

Onshore rate is usually 3 baht weaker against the dollar

the spread has narrowed. presently less than 2 Baht pder Dollar.

[JimmyTheMook]

Onshore rate is usually 3 baht weaker against the dollar

the spread has narrowed. presently less than 2 Baht pder Dollar.

Has this ever happened before?

I never remember seeing rates for the baht onshore and offshore.

[RHCP]

So I see on Bloomberg that the "offshore" rate is around 32, yet any other banking service has the rate in the mid 34's.  Why the huge difference and how can I get in on this?

 

On a very recent trip to the UK via Singapore, I changed Thai Baht for 400 pounds sterling at Bangkok airport. I was aware of the difference in offshore rates and just for interest, once arriving at Singapore airport, I enquired about how much the Baht equivalent would have given me after first having to change into Singapore dollars then to pounds. It worked out to around 370 pounds so for me there was no advantage whatsoever. Changing Baht in London would have been a joke as the spread is unbelievably wide and to add insult they also charge commission. I think for the ordinary person this disparity between offshore and onshore rates has no benefit.

[Filer]

The offshore rate is a rate presumably more reflective of the true value of the Baht vs. the Dollar as a result of trading offshore.

Money that comes into Thailand and converted by banks in Thailand use the "onshore rate" which is affected by the Bank of Thailand efforts to "stabilize" money flows and their periodic intervention in the market.

Onshore rate is usually 3 baht weaker against the dollar and that is why most instruct the wiring institution to wire dollars rather than baht, otherwise the offshore rate prevails vs. the onshore rate which occurs when the dollars get here and are converted.

ProTHaiExpat has summarised it well. Thanks for reducing it to essentials. However, I remain curious about one thing. It seems to me that earlier in the year the banking system in London was clearly working on the 'offshore' rates, some 5-7% less advantageous than the 'onshore' rate, if you were wanting to buy Baht. Now, however, London seem to be fairly closely aligned with the 'onshore' rate, with middle commercial rates on 29 May of 68.63 for Pounds and 34.63 for Dollars (compared to 65.00 and 32.80 from a typical international currency trader, which looks correctly like the 'offshore' rate). Is it possible for London to be working now on the 'onshore 'rates?

[Naam]

Onshore rate is usually 3 baht weaker against the dollar

the spread has narrowed. presently less than 2 Baht pder Dollar.

Has this ever happened before?

I never remember seeing rates for the baht onshore and offshore.

it has not as far as i can remember. the reason for the different exchange rates are the currency restrictions introduced by the Bank of Thailand in december.

[samran]

The offshore rate is a rate presumably more reflective of the true value of the Baht vs. the Dollar as a result of trading offshore.

Money that comes into Thailand and converted by banks in Thailand use the "onshore rate" which is affected by the Bank of Thailand efforts to "stabilize" money flows and their periodic intervention in the market.

Onshore rate is usually 3 baht weaker against the dollar and that is why most instruct the wiring institution to wire dollars rather than baht, otherwise the offshore rate prevails vs. the onshore rate which occurs when the dollars get here and are converted.

I'd actually thought it was the other way around, that the onshore rate is more reflective of the true value of the baht.

The baht is more expensive offshore becuase there is less baht to buy and sell off shore. Illiquid markets very rarely have the proper price signals.

The liquid market is onshore. Buy and sell as much baht as you like here (though with restrictions on transfering money OS). Liquid market = more reflective pricing.

Maybe I'm wrong though. It is just the way I've always understood it.

[Naam]

The offshore rate is a rate presumably more reflective of the true value of the Baht vs. the Dollar as a result of trading offshore.

Money that comes into Thailand and converted by banks in Thailand use the "onshore rate" which is affected by the Bank of Thailand efforts to "stabilize" money flows and their periodic intervention in the market.

Onshore rate is usually 3 baht weaker against the dollar and that is why most instruct the wiring institution to wire dollars rather than baht, otherwise the offshore rate prevails vs. the onshore rate which occurs when the dollars get here and are converted.

I'd actually thought it was the other way around, that the onshore rate is more reflective of the true value of the baht.

The baht is more expensive offshore becuase there is less baht to buy and sell off shore. Illiquid markets very rarely have the proper price signals.

The liquid market is onshore. Buy and sell as much baht as you like here (though with restrictions on transfering money OS). Liquid market = more reflective pricing.

Maybe I'm wrong though. It is just the way I've always understood it.

you are not wrong. the situation is exactly as you described it.

[pete_r]

So I see on Bloomberg that the "offshore" rate is around 32, yet any other banking service has the rate in the mid 34's. Why the huge difference and how can I get in on this?

On a very recent trip to the UK via Singapore, I changed Thai Baht for 400 pounds sterling at Bangkok airport. I was aware of the difference in offshore rates and just for interest, once arriving at Singapore airport, I enquired about how much the Baht equivalent would have given me after first having to change into Singapore dollars then to pounds. It worked out to around 370 pounds so for me there was no advantage whatsoever. Changing Baht in London would have been a joke as the spread is unbelievably wide and to add insult they also charge commission. I think for the ordinary person this disparity between offshore and onshore rates has no benefit.

Same conclusion for the Euro. The offshore rate hoovers around 44 Bahts / Euro, but at Paris airport you need 51 Bahts to buy 1 Euro (as of 15 May). Better to change at Bangkok airport at the onshore rate of 46-47 Bahts / Euro.

[steelepulse]

[>>Same conclusion for the Euro. The offshore rate hoovers around 44 Bahts / Euro, but at Paris airport you need 51 Bahts to buy 1 Euro (as of 15 May). Better to change at Bangkok airport at the onshore rate of 46-47 Bahts / Euro.

With that much of a spread, you could do OK flying huge amounts of cash back and forth

[samran]

[>>Same conclusion for the Euro. The offshore rate hoovers around 44 Bahts / Euro, but at Paris airport you need 51 Bahts to buy 1 Euro (as of 15 May). Better to change at Bangkok airport at the onshore rate of 46-47 Bahts / Euro.

With that much of a spread, you could do OK flying huge amounts of cash back and forth

wouldn't work.

The same paris exchange both, while charging you 51 baht to buy 1 euro, will probably only give you 40 baht back, when you return that Euro to them (plus a 3% commission).

So if you took baht from Thailand and exchanged it in Paris, it would be more expensive to buy 1 Euro there than it would here in Thailand (51baht for 1 EUR there vs 47 baht for 1 EUR here).

And why you would want to spend 1 euro to get 40 baht in paris, when that same euro could get you 46 baht here is beyond me.

[kc_phil]

Sorry guys. I am kind of dim.

Does all this mean that if i am going for a holiday in LOS, I am better off bringing my dolars IN and exchanging them at SuperRich or someplace like that rather then exchanging them into Baht offshore or through an ATM machine?

sorry. I get real confused about this stuff.

[bkkandrew]

Sorry guys. I am kind of dim.

Does all this mean that if i am going for a holiday in LOS, I am better off bringing my dolars IN and exchanging them at SuperRich or someplace like that rather then exchanging them into Baht offshore or through an ATM machine?

sorry. I get real confused about this stuff.

Yes. Bring cash. Change Super Rich. All done now?

[lotus eater]

The offshore rate is a rate presumably more reflective of the true value of the Baht vs. the Dollar as a result of trading offshore.

Money that comes into Thailand and converted by banks in Thailand use the "onshore rate" which is affected by the Bank of Thailand efforts to "stabilize" money flows and their periodic intervention in the market.

Onshore rate is usually 3 baht weaker against the dollar and that is why most instruct the wiring institution to wire dollars rather than baht, otherwise the offshore rate prevails vs. the onshore rate which occurs when the dollars get here and are converted.

ProTHaiExpat has summarised it well. Thanks for reducing it to essentials. However, I remain curious about one thing. It seems to me that earlier in the year the banking system in London was clearly working on the 'offshore' rates, some 5-7% less advantageous than the 'onshore' rate, if you were wanting to buy Baht. Now, however, London seem to be fairly closely aligned with the 'onshore' rate, with middle commercial rates on 29 May of 68.63 for Pounds and 34.63 for Dollars (compared to 65.00 and 32.80 from a typical international currency trader, which looks correctly like the 'offshore' rate). Is it possible for London to be working now on the 'onshore 'rates?

I too am blinded by this science of forex rates - and I do need a simple answer as I'll be transferring money in the next 10 days.

Is it correct that when I'm having money sent here from England I'm always better off to instruct my bank there to transfer a specific amount in £s and not in bahts - and thus leave it to my receiving thai bank to do the exchange?

Hope someone will tell me definitively either "Yes" or "No, the reverse".

[stament]

Sorry guys. I am kind of dim.

Does all this mean that if i am going for a holiday in LOS, I am better off bringing my dolars IN and exchanging them at SuperRich or someplace like that rather then exchanging them into Baht offshore or through an ATM machine?

sorry. I get real confused about this stuff.

Yes. Bring cash. Change Super Rich. All done now?

Really? I was always told best to withdraw from my nationwide account as got best rate. Interesting to know.

[Naam]

Is it correct that when I'm having money sent here from England I'm always better off to instruct my bank there to transfer a specific amount in £s and not in bahts - and thus leave it to my receiving thai bank to do the exchange?

YES!

[highchol]

The offshore rate is a rate presumably more reflective of the true value of the Baht vs. the Dollar as a result of trading offshore.

Money that comes into Thailand and converted by banks in Thailand use the "onshore rate" which is affected by the Bank of Thailand efforts to "stabilize" money flows and their periodic intervention in the market.

Onshore rate is usually 3 baht weaker against the dollar and that is why most instruct the wiring institution to wire dollars rather than baht, otherwise the offshore rate prevails vs. the onshore rate which occurs when the dollars get here and are converted.

ProTHaiExpat has summarised it well. Thanks for reducing it to essentials. However, I remain curious about one thing. It seems to me that earlier in the year the banking system in London was clearly working on the 'offshore' rates, some 5-7% less advantageous than the 'onshore' rate, if you were wanting to buy Baht. Now, however, London seem to be fairly closely aligned with the 'onshore' rate, with middle commercial rates on 29 May of 68.63 for Pounds and 34.63 for Dollars (compared to 65.00 and 32.80 from a typical international currency trader, which looks correctly like the 'offshore' rate). Is it possible for London to be working now on the 'onshore 'rates?

I too am blinded by this science of forex rates - and I do need a simple answer as I'll be transferring money in the next 10 days.

Is it correct that when I'm having money sent here from England I'm always better off to instruct my bank there to transfer a specific amount in £s and not in bahts - and thus leave it to my receiving thai bank to do the exchange?

Hope someone will tell me definitively either "Yes" or "No, the reverse".

Lotus eater the answer is yes tx in pounds if you must.

However if you were to have a nationwide debit card you could use it in thailand to get your money without having to pay any transfer fees. The card has no overseas fees for usage.

[sonicdragon]

Is it only me who is fed up with questions about the onshore/offshore rates and how best to exchange money ? I haven't been here much recently for lack of time, but every time I do take a look there is a at least one new thread on the subject and that's been the case for months now. Doesn't this topic deserve to be pinned if only to preserve the sanity of the people here who keep having to repeat themselves ad infinitum ?

[lotus eater]

Is it correct that when I'm having money sent here from England I'm always better off to instruct my bank there to transfer a specific amount in £s and not in bahts - and thus leave it to my receiving thai bank to do the exchange?

YES!

Thank you.

[samran]

Is it only me who is fed up with questions about the onshore/offshore rates and how best to exchange money ? I haven't been here much recently for lack of time, but every time I do take a look there is a at least one new thread on the subject and that's been the case for months now. Doesn't this topic deserve to be pinned if only to preserve the sanity of the people here who keep having to repeat themselves ad infinitum ?

seriously, feel free to write something that is pinnable.

You are right, exchange rates are one of these things that do peoples heads in. When I was tutoring economics back in my uni days, talking about exchange rates was a guaranteed way of screwing with the heads of 90% of people.

[lotus eater]

Lotus eater the answer is yes tx in pounds if you must.

However if you were to have a nationwide debit card you could use it in thailand to get your money without having to pay any transfer fees. The card has no overseas fees for usage.

I need to get a largish amount across to my thai bank now - and I'm in europe. So I'll go ahead with the SWIFT transfer.

But as it happens I do have a Nationwide account. So for the future your suggestion to use the debit card seems advantageous - subject to 2 questions

- will the rate be just as good?

- these withdrawals of course have a daily limit. so if I deposit a series of them in my account

to build up to my required 800,000 for the annual visa renewal will immigration cause a

problem? (maybe i should put this query in the visa forum/section).

[chatette]

Samran is absolutely correct to say the onshore rate is more reflective of the true value of the baht per dollar than the offshore rate, which is largely illiquid. Anyone using Bloomberg can see that it actually posts both rates, using THB for the offshore and THBO for the onshore. The gap reflects supply and demand. The onshore rate reflects demand generated by exporters and other exchanging dollars for baht, and importers baht for dollars. You can see that imports have shrunk substantially over the past 12 months or more due to shrinking domestic demand that's linked to the ongoing political divisions, while the dollar has also declined relative to the baht, mostly because of the US housing/economic slowdown. Conversely, exports rose to a record last month. Current account data, due next week, will probably show a widening surplus, putting further upward pressure on the baht. The four cuts in Thai rates this year have limited onshore baht gains this year after the currency surged something like 16 percent last year. Those gains are what prompted the central bank to impose the capital controls last December that created the dual rates. The controls imposed a penalty on foreign investors bringing currency into the country, and triggered the 16 percent slide in the stock market that prompted the reversal for equity funds the same day the measures were imposed. Pridiyathorn resigned as Finance Minister the very day in February that the central bank governor told foreign bankers over their post-dinner coffee that those currency controls that he lauded, and probably designed, would be abandoned for investors hedging foreign fund inflows to avoid profiting from baht gains. Coincidence? I doubt it.

Currency traders can certainly arbitrage on the gap between the onshore and the offshore rates. But for normal people bringing in funds for personal use, the best option is to wire their money to their bank account to benefit from the onshore rate or, for smaller amounts, convert their cash at the bank rate here or use their Visa to withdraw funds at the ATM.

Edited June 25, 2007 by chatette

[sonicdragon]

Is it only me who is fed up with questions about the onshore/offshore rates and how best to exchange money ? I haven't been here much recently for lack of time, but every time I do take a look there is a at least one new thread on the subject and that's been the case for months now. Doesn't this topic deserve to be pinned if only to preserve the sanity of the people here who keep having to repeat themselves ad infinitum ?

seriously, feel free to write something that is pinnable.

You are right, exchange rates are one of these things that do peoples heads in. When I was tutoring economics back in my uni days, talking about exchange rates was a guaranteed way of screwing with the heads of 90% of people.

Check some of my previous posts on the topic. Or are you saying that it needs a new thread that would then be pinned ?

Tutoring economics in your uni days ? Tutoring to who ? I've also been there - I tutored to non-economics students in a UK ex-polytechnic (by definition, not students to whom the subject comes naturally) and I didn't see the kind of confusion you imply. But that is completely irrelevent to us. For the needs of most readers here, a simple explanation of the onshore/offshore rates that I gave already, and some general advice about transfering money (already given in this thread by others) is all that is needed, and I think it would be very useful. I'll try to do it if I have a few free minutes. The problem is that someone will always argue about it, or take the discussion in other directions.

[sonicdragon]

OK I have done it.

[cclub75]

Samran is absolutely correct to say the onshore rate is more reflective of the true value of the baht per dollar than the offshore rate, which is largely illiquid.

A very good sum'up of the situation.

However... I don't agree with you about the on shore rate that would be more reflective of the true value of THB.

Off shore, illiquid ? Yes. But on shore too. I mean differently. The on shore rate is manipulated by the BOT.

BOT has suffered by the way large losses, due to its interventions on forex. Anyway.

So on one hand illiquid/real value and the other hand liquid/manipulated.

I'm not sure what is the best deal.

My point is : we know that THB should continue to increase. Have to. Like all the asian currencies, that are -still- more or less artificially depressed.

Basically, what Thailand is following is... the chinese model. Nothing less, nothing more.

Of course, there is no (officially) a peg with USD anymore for THB, unlike the chinese RMB.

So they have "created" the dual rates.

Since december, we could consider that BOT is achieving the same goal (to depress its currency vis a vis of USD, or at least to curb its increase, in order to protect the exports), but with other means.

That's the other side of the USD problem (a part from the USA themselves) : Asia is cheating. Asia don't play by the rules.

USA are cheating. Asia is cheating. We have therefore a double problem. It's easy to understand that the next crisis is going to be... seriously leveraged.

Edited June 25, 2007 by cclub75

[Naam]

Currency traders can certainly arbitrage on the gap between the onshore and the offshore rates.

no, they can't. if there were possibilities to arbitrage then the difference between off-/onshore rate would not have lasted more than 5 months.

[calibanjr.]

Currency traders can certainly arbitrage on the gap between the onshore and the offshore rates.

no, they can't. if there were possibilities to arbitrage then the difference between off-/onshore rate would not have lasted more than 5 months.

Or 5 minutes! If there exists a instutionally standard mechanism to make arb execution on such an obvious play, the spread is narrowed down to a wash (vs. execution cost), like immediately. If there is a way to buy the offshore offer and sell the onshore bid (or better), it's probably pretty complex (and grey IMO) and needs some serious inside info/pull that ain't readily available to anbody without epaulette-wearing Thai friends.

Edited June 26, 2007 by calibanjr.